Industrial production in the US increases significantly in September

WASHINGTON (Reuters) Production at U.S. factories rose more than expected in September despite auto industry strikes curtailing motor vehicle production, providing further evidence that the economy emerged from the third quarter with momentum.

Industrial production rose 0.4% last month, the Federal Reserve said Tuesday. August data was revised down to show that factory output fell by 0.1%, rather than rising by 0.1% as previously reported. Economists polled by Reuters forecast that factory output would increase by 0.1%.

In September, production decreased by 0.8% year-on-year. The situation did not change in the third quarter. The production of durable goods increased by 2.3% year-on-year, which was offset by the pace of decline in the production of non-durable goods sector by 2.4%.

Production of motor vehicles and parts rose 0.3% last month after falling 4.1% in August.

UAW picket outside a Ford truck plant in Kentucky. REUTERS/Luke Sharrett

The United Auto Workers (UAW) union launched limited strikes in mid-September at plants owned by General Motors, Ford and Chrysler’s parent company, Stellantis. Since then, industrial action has intensified, causing the closure of a Ford truck plant in Kentucky last week.

Despite last month’s strong performance, the manufacturing sector remains constrained by slowing demand for goods due to higher interest rates. Beginning in March 2022, the Federal Reserve raised its benchmark overnight interest rate by 525 basis points to the current range of 5.25%-5.50%.

Manufacturing accounts for 11.1% of the economy. However, the worst is likely over for the sector, with the country’s factory activity index, kept by the Institute for Supply Management, rising to its highest level in 10 months in September.

Last month, the production of wood, primary metals, plastics and rubber products increased significantly. However, the production of clothing and leather, as well as printing and auxiliary products, is declining.

Mining production increased by 0.4% after increasing by 0.2% in August. Utility output fell 0.3% after rising 0.7% in the previous month. Overall industrial production increased by 0.3% in September, after remaining unchanged in August.

Industrial production increased by 2.5% in the third quarter. This followed a growth rate of 0.7% in the second quarter.

Capacity utilization in the industrial sector, a measure of how companies fully utilize their resources, increased by 0.2 percentage points to 79.7% in September. It is now equal to the 1972-2022 average. The manufacturing operating rate increased to 77.8% from 77.7% the previous month and is 0.4 percentage points below the long-term average.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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